President of Credit Resource Corporation

CRC is committed to educating consumers about the credit scoring system and current events in the Credit Industry that can affect you. That is why I feel it is important to post ou this Alert regarding an announcement made by Fannie Mae that will affect each and every consumer who has a goal to purchase a new home, refinance their existing home loan, or apply for a Home Equity Line of Credit.

We all know that home values have softened. We all know that a record number of foreclosures are in the offing. We all know that people who extend beyond their reach run the risk of suffering a tremendous loss-a loss that will hurt them now and in the years to come. But thanks to the recently announced Loan Level Price Adjustments (LLPA) from Fannie Mae and Freddie Mac, having less than a 720 in today's credit environment will cost you big: up to a 2% increase in your interest rate! Click Here to access a copy of this announcement and to see how this will affect you.

LLPAs are mandatory surcharges based strictly on credit scores. They are additional fees paid to Fannie Mae or Freddie Mac, not your mortgage professional. Analysts suggest that imposing these "penalties" is a blatant effort to recoup - and to help lessen further losses - on foreclosures. The surcharge could mean thousands of dollars for borrowers who do not monitor and maintain a good credit rating.

It's just simple math. Homeowners who need to solidify a tenable, long-term situation to help them stay on course require the lowest payment possible-a long-term situation that hinges on the credit report. The best way to ensure the most favorable terms possible through the sub-prime crisis and housing market downturn-the effects of which no one can know at this time-is to make certain your credit scores are strong as they can possibly be when they go to lock-in a better and longer-term loan product.

The time to get "loan ready" is always before you need a home loan. The best time to start preparing for obtaining a mortgage is six months in advance of when you actually need it. "Nearly 80% of all credit reports contain incorrect information, robbing millions of people each year." The best part is though that with a little work, I have seen scores improve from 50 to 200+ points in as little as 3-6 months, so my message to you today is that I want you to be proactive in taking control of your financial health. And the first step is to

Now is the time to take proactive steps to improve your credit scores so that you can get the best loan possible and here are some tips to help you start improving your credit scores today:

1. Consider Hiring A Professional: If you feel that the credit challenges you are facing are too much, or you don't have enough time to do the work necessary to improve your own credit, don't lose hope and give up. Consider using a professional service to help you reach your credit scoring goals. If you are interested in talking to a CRC credit specialist about joining our program, please send us an email at info@creditresourcecorp.com and a specialist will call you to talk about your situation. Click here to download our New Client Paperwork which will give you a good idea of what you can expect from working with CRC..



2. Get Educated and Stay Informed: There is an abundance of information out there on credit education. By learning what to do to proactively monitor and protect your credit, you can get a good score and keep it that way. There are no quick credit fixes, but you can make dramatic improvements over time.
   
   
3. Monitor your credit quarterly: This way, you will be able to see what’s on the report to determine what you can clean up, what doesn’t belong there, what isn’t there that should be, and make any adjustments to realign your credit reports so that you are credit ready at all times.
   
   
4. Verify that the data affecting your payment history is being reported accurately. Check all accounts for late pays. Were you late? If yes, is the late being reported in the correct month? If not, by law it should be removed. Check for collections. There are so many nationwide collection scams going on that it is now necessary to check our reports quarterly (at a minimum) to make sure that we are not victims. Per Sec. 1692g. of the Fair Debt Collections Act, the burden of proof is on the collector not you, and if you ask them for it, they have to provide you with the following information:
   
   
   • Date they purchased the debt
   • Amount they paid for said debt
   • Date of last payment/activity, if any
   • Original creditors full name and address
   • All records pertaining to actual debt to prove validity
     
     

   If they cannot provide you with this information, then the account must be deleted from your credit report.

5. Follow these Top Ten Do's and Don'ts of credit if you are planning to enter into a loan transaction in the next 6 months:
   • DON'T APPLY FOR NEW CREDIT OF ANY KIND. Including those "You have been pre-approved" credit card invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.
   
   
   
   • DON'T PAY OFF COLLECTIONS OR CHARGE OFFS without first having the creditor validate the debt. Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.
   
   
   
   • DON'T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account it will appear to the FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure it is a more recent account.
   
   
   
   • DON'T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.
   
   
   
   • DON'T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in 4. If you want to save money on credit card interest rates, wait until after closing.
   
   
   
   • DON'T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.
   
   
   
   • DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or even daily depending on the program you select. (When you pull your own reports, you don't get dinged for a hard inquiry.) This way, if something does show up on your reports that has caused your score to go down, you'll know it immediately, and you may be able to take care of the problem before closing.
   
   
   
   • DO STAY CURRENT ON EXISTING ACCOUNTS. Like your mortgage and car payments. One 30-day late can cost you anywhere from 30-75.
   
   
   
   • DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red Flags are raised easily with the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.
   
   

In Conclusion:

Your good credit is well worth the effort it takes to both achieve it and preserve it. If you have good credit, use the tips above to help you keep it that way. In doing so, you will continue to enable yourself to enjoy the best loans for the lowest possible rate of interest. If you are seeking to improve your credit, understand that your efforts will be paid off in spades.

Remember, with your good credit, the brightest financial future awaits you!

All the best.

All the Best,
Linda Ferrari,
President, Credit Resource Corp.